e-business and
Knowledge
Management -
Approach and
Experience
Prabuddha Banerjee, Roger Baumer,
Johannes Hennekeuser
The e-business Principle
This is one chapter out of the book
that was published by IBM
Consulting Group, Zurich in 2000.
Overview
•
Knowledge is the enterprise’s key competitive
asset. Knowledge management should not be
considered as independent from business
strategy and core processes.
•
Business processes must be supported by
knowledge; both explicit and implicit knowledge
must be taken into account.
•
A culture of open exchange, leadership, user
integration, and efficient communication
technologies are necessary requirements for
the implementation of knowledge
management.
•
With the use of e-business applications,
knowledge management can be designed more
effectively and expanded beyond enterprise
borders.
1 What is "knowledge" and what is
"knowledge management"?
The awareness of knowledge as a critical element
for economic success, if not survival, in a dynamic
and intensely competitive environment has been
apparent to managers and businesses across all
industries for some time. Concepts like
"Management of Core Competencies", "Resource
Based Strategies", "Learning Organization" and "Use
of Expert Systems" are evidence of this. Recently a
new concept has arisen: the handling and
deployment of knowledge as a valuable business
resource requires more than just strategy and IT.
Information technology does play an important role
in enabling the collection, distribution, and use of
knowledge at any place or time, even beyond the
limits of the organization. That is why there are an
enormous number of conferences and probably
hundreds, if not thousands, of articles and books
that deal with all kinds of approaches to knowledge
management.
However, many questions still remain unanswered,
and solutions become evident only after the abstract
concept of knowledge management is applied to the
realities of business. Such questions include: How
and where should we start? What knowledge is
relevant to doing business? What is the concrete
economic value? How do we need to change our
organization? What’s the contribution of information
and communication technology? How can we use
our combined knowledge to go beyond the value
chain?
This article will help to find answers to these
questions. We cannot present a fail-safe "recipe" for
success, of course but we can highlight the
characteristics of successful projects based on our
experiences with our customers and with our
company, IBM.
1.1 Knowledge
Firstly, we wish to distinguish the term "knowledge"
from the terms "data" and "information", by using a
comparison with the workings of a supermarket.
Data involves simple statements about facts or
events. In our comparison, this could be a data
sheet with product numbers, quantity, and price.
This data is saved in the inventory control system of
the supermarket. When you give meaning to data it
becomes information. A piece of information is
exchanged between a sender and a recipient
through a communication medium. In our example
of the supermarket, it is the sales slip that gives you
information about your purchase and the amount
you paid.
Knowledge builds upon information, enriching it
with experience and context. After a visit to the
supermarket, you will know what the store looks
like, whether the cashier was friendly, whether the
item you have purchased is up to your expectations,
and whether you have found what you were looking
for. These experiences and impressions determine
whether you will consider visiting this supermarket
again (utilizing your knowledge), or even if you will
recommend it to your friends (sharing your
knowledge with others). Hence, knowledge controls
actions and decisions.
Let us consider the same supermarket example
from the supplier’s point of view. The collected data,
which on its own is useless, will be consolidated and
structured, resulting in information on business
activity. We only talk about knowledge when the
recipient, evaluates the information and based on all
collected experiences, derives decisions. So, for
example, supermarket managers might decide on a
new display, an adjusted market approach,
measures to reduce overhead costs, or a
combination of these elements. In alignment with
this store's e-business strategy, this knowledge will
be distributed to the entire supermarket chain and
shared with important suppliers and customers.
1.2 Kinds of knowledge
We differentiate between explicit knowledge and
implicit knowledge. Explicit knowledge can be found
in documents, plans, methods, process descriptions,
check lists, drawings, and expert systems. Because
this knowledge is documented, it can be saved in a
database or an application and is available
immediately. With an appropriate IT infrastructure, it
is even available beyond enterprise borders.
The knowledge of an individual, team, or entire
business is far more than could ever be written
down within the confines of normal time and
resources. "White space" will remain in documented
knowledge, and these areas will only be explored
when they are needed. We call this type of
knowledge "tacit" or "implicit" knowledge. It contains
experiences, intuition and standards of behaviour
that influence our discernment and, therefore, our
actions. Implicit knowledge is usually richer and
more profound than explicit knowledge. Depending
on the situation, one can access implicit knowledge,
reconfigure it, and enhance it more quickly.
1.3 Knowledge management and e-business
To use this immense knowledge as a resource in a
business value chain, a systematic approach is
necessary for management to make the collected
knowledge available inside and outside of the
enterprise. From a knowledge perspective, this
approach combines improvements in processes,
organizational structures, and the company’s
culture, as well as its information technology. E-
business, which comprises the implementation of
new business models and corresponding business
processes by using information and communication
technology, requires a similar approach.
Now, after having formed the theoretical base, we
will use a real case to show how the IBM Consulting
Group helped a customer on his way to managing
knowledge.
2 The Case of Wellesley Ltd.
2.1 Background
Wellesley Ltd. is a European enterprise and a
worldwide leader and pioneer in the industrial
sector. Its wide range of products appeals to
consumers who demand appliances customized to
their specifications. The focus on customization
creates demanding requirements for Wellesley’s
sales staff.
Twenty-five branches in Europe, America, and Asia,
as well as a network of representatives and
distributors in various countries, form the
company’s global presence. Production is
concentrated in five locations, while marketing is
decentralized. The customization of the end product
according to individual local or regional customer
needs is at the discretion of each respective
corporate branch. Therefore it is necessary to
leverage specific skills and expert knowledge across
the company. Because business subsidiaries focus
on different products for their respective markets,
specific knowledge is scattered all over the world.
Research and development, on the other hand, are
centralized at corporate headquarters.
2.2 Problems with the flow of information
and knowledge
Because of the enterprise's decentralized structure
and geo-global alignment, the flow of information
has always been an important topic. Headquarters
mails brochures, detailed product information and
specifications, instructions for customization, and
criteria catalogues for the product of choice to each
subsidiary. The information that flows back to
headquarters consists mostly of customer
complaints and product requests. More and more,
these old processes were not able to appropriately
meet new information demand. Since information
was mostly paper-based and flowing in only one
direction, headquarters did not receive any feedback
regarding their subsidiaries’ and customers’ needs
and problems. Also, branches complained that they
did not receive information on time.
A culture of "knowledge sharing" did not exist in this
enterprise. Knowledge about innovative applications
and "best practices" for customized solutions were
only exchanged informally, or literally, by accident.
Due to the large variety of the company’s products
and varied customer needs, answering customer
inquiries took a long time. These problems with
information and knowledge exchange had a
negative impact on the company's activities. Below
are some typical examples:
•
The lack of shared information and knowledge
about products and applications, and
experiences regarding customization, led to
"continual reinvention of the wheel". This
influenced product quality and increased
manufacturing and installation time,
consequentially increasing costs.
•
Customer satisfaction and company and
product image suffered due to the fact that
different subsidiary corporations were offering
multiple products for the same customer
problem, and customer needs were only met
after long delays.
2.3 The Approach
Now we will outline the approach and the critical
success factors of the implementation. The IBM
Consulting Group chose a three-step approach that
breaks down into several sub-steps. In the first step
we identified the knowledge strategy, which was
derived from the corporate strategy and the critical
success factors. We also examined the kind of
knowledge that is needed to support the core
processes. In the second step we developed the
"Knowledge Management System" with applications,
organizational roles and responsibilities, and
required processes. Finally, in step three, the system
is implemented. In the next sections we will outline
the implementation using the example of Wellesley
Ltd.
2.4 Definition of Knowledge Strategy
The initial questions were: How can we apply
knowledge as a resource and use it to improve
competitiveness? Which processes influence the
application of strategy, and which type of knowledge
plays a role in these processes? At the beginning of
the article, we showed that successful knowledge
management builds directly upon the company's
strategy. Therefore, we conducted interviews with
the CEO and members of the executive
management to uncover Wellesley's critical success
factors. The following factors could be identified:
•
Offer high quality products through customizing
basic products with sophisticated production
technologies and skills.
•
Maintain price leadership
•
Increase attention to customer needs
•
Be first in the development of new products, the
provision of goods to customer requirements,
and new application possibilities
•
Increase flexibility inside the organization to
provide international range of goods and to
solve industry-wide problems.
In the next sub-step we identified business
processes that have the greatest impact on these
success factors. A core team with representatives
from corporate headquarters and important
subsidiaries was established, making it possible to
include all the different requirements and points of
view that existed throughout the company as a
whole.
Results of this collaboration were four processes
which had the greatest influence on success factors:
Logistics, product marketing, customization, and
after-sales service.
Next, the core team defined the specific influence of
each process on the business and the knowledge
necessary to exert this influence. If, for example,
"product marketing" should contribute to the
success factors, the following knowledge should be
accessible:
•
Experiences and guidelines for choosing the
best product for specific customer applications
•
Reliable support for all international customers,
with product recommendations and offers that
are consistent throughout all subsidiaries
•
Use of experiences of subsidiaries in all
countries to shorten development time in new
industrial sectors.
2.5 Development of the Knowledge
Management System
The initial questions were: How exactly can we
infuse processes with existing and future
knowledge? Which business processes and what
supporting company culture need to be created?
2.5.1 Prioritization, design and
development of applications
Previous knowledge should be pooled into
applications that enable its retrieval. For the
existing process of "product marketing", this
means a supported application that provides
timely and exact information on criteria for
product use, product data sheets, product
brochures, and technical support. We will call
this application "marketing support".
We used the two criteria, "influence on
business" and "implementation efforts", to
prioritize all possible and required applications
(for all business processes). In this analysis,
developmental costs and time were not the only
two fundamental issues. In addition, our
experiences showed that for project’s success,
quick wins are also necessary to prove at an
early time, the value of the project applications
to the entire enterprise. This will facilitate not
only development but also subsequent
implementation.
Through prioritization, we found out that the
"value chain" application will have an immense
impact on business success. However, the
general implementation and rollout of such an
application would have required the migration
of the existing standard application system. Due
to the extensive implementation time and
financial efforts this would have required, the
implementation of this application was put
further down on the priority list.
On the other hand, applications with low
influence but ideal implementation
requirements were rated as high priority. To get
a complete picture, this procedure was
discussed at length with executive managers of
subsidiary corporations and a core team from
corporate headquarters.
2.5.2 Definition of knowledge processes,
roles and responsibilities
During this sub-step we determined the
principles for gathering, using and enhancing
knowledge. As initially mentioned, information
is the foundation for knowledge management.
Only experience in dealing with information
enables effective knowledge management.
Definite rules for dealing with information must
be established to avoid the danger of having to
rely on obsolete information that is inaccurate
and, ultimately, useless. Without a superior
information base, knowledge management has
no foundation whatsoever.
2.5.3 The Knowledge Management
System of Wellesley Ltd.
At Wellesley Ltd., knowledge is generated along
processes, evaluated, structured, and
registered. Only then it is available for users.
Knowledge experts are responsible for the
quality of this process. In a subsequent stage of
expansion, customers and suppliers can be
integrated into the system.
2.6 Critical Success Factors for
Implementation
The implementation of knowledge management
systems requires the similar number of processes as
the implementation of other systems. That's why we
will discuss only a few features of the present
project here.
2.6.1 Top-Down: Leadership
Without the strong leadership of the sponsor,
knowledge management will remain a project
among many, and will not develop to its full
potential value. In the present case, the CEO
himself was the executive sponsor. His
integrated role, as well as his active
communication, was of crucial importance
because of the decentralized organization of the
corporation. Resistance could be effectively
thwarted. For example: chain store managers
complained about the time and effort that it
would take to "feed" the system, and were
afraid that their control over information flow
would be threatened. The necessary
investments in server, network, and support
infrastructures also met with resistance. With
CEO’s support and a few "change agents", as
well as the launch of an information blitz, these
barriers were overcome and a more positive
basic attitude was generated among
employees.
2.6.2 Bottom-up: Integration of Users
Beginning with project launch, users from
across the organization were integrated into
development activities. This was a radical
change from the usual one-sided practice of
predetermining business unit needs at
corporate headquarters. During the workshops,
users were enthusiastic about joining in. They
made decisive contributions to system design,
and infected the rest of the organization with
their enthusiasm. The politics of "do it first, ask
questions later" would have doomed the
project to failure.
2.6.3 User Scenario Marketing
The information process described earlier
required additional time requirements for users
during the initial stages. To market the system
internally, we developed day-to-day scenarios
for every application, which demonstrate the
project’s usefulness to daily work. Those
scenarios contained three elements for each
application: The problem, the possible solution
of the day’s problem without the knowledge
management system, and the solution using the
system. The scenarios were developed together
with users during system design.
2.6.4 IT Support
Smooth system operation, as well as quick and
competent system support, increases
motivation for system use. We integrated the
day-to-day scenarios into the training platform,
and were able to prove that the project is much
more than just another IT System. The local
help desks, serving a combined total of 1,500
users worldwide, also provided support for the
new system. This met internal customer as well
as cost requirements. To provide for further
system expansion, we included the IT
infrastructure. We made sure that the scalable
platform would be able to handle system
growth and further applications.
3 Remarks
The system has paid off during its use, and Wellesley
Ltd. has brilliantly mastered the challenges we
mentioned in the beginning of this article. The next
steps have already been discussed: Wellesley Ltd.
knowledge should be provided for strategic
customers and suppliers, too. This once traditional
industrial company is evolving toward e-business,
with a business model that builds upon their most
valuable resource: knowledge.